Costs of unpaid student loans could 'exceed income raised by increase in tuition fees'

 

The costs of unpaid student loans could eventually exceed the income raised by the increase in university tuition fees, government figures show.

The point at which the tuition fee rises in England and Wales is cancelled out is calculated by experts to be when 48.6 per cent of graduates earn too little to repay their loans.

According to a written parliamentary answer from the Universities Minister, David Willetts, the Government believes that 45 per cent of graduates will fail to earn enough to pay back the money they were loaned.

By contrast, when the Government was working out the impact of the tuition fee rises, it worked on the basis that just 28 per cent of loans would not be repaid in full.

The figures are based on long-term projections which could change but erode will confidence in ministers’ justification for introducing the controversial tuition fee rises soon after the Coalition was formed.

The rise, arguably the most controversial and electorally toxic policy of the Coalition, meant that from 2012 students going to university faced having to pay tuition fees of up to £9,000 each year, a huge increase from the £3,000 annual maximum until then.

Nick Clegg and the Liberal Democrats were widely condemned for what many people, especially those of student age, perceived to be a betrayal. In the Party’s manifesto there had been a pledge to oppose tuition fee rises.

Part of the reason for unpaid loans getting so close to outstripping the extra income generated by the hiked fees is that one of the concessions during negotiations was a decision to increase the minimum annual income level of students from £15,000 to £21,000 before they would have to start paying back what they borrowed.

A spokeswoman for the Department for Business, Innovation and Skills said: "The principal aim of our reforms was to put higher education on a sustainable footing for the long-term.

“Our universities are now well-funded and this is driving up the quality of the student experience and helping to stimulate economic growth. We are also protecting those on lower incomes and those from poorer backgrounds are applying in record numbers.

“The RAB charge is an estimate based on a prediction of economic circumstances some 35 years in the future. Estimates can and will continue to change.”

Liam Byrne, Labour's shadow Universities Minister, told the BBC: "What today's figures show is that the government tripled fees, put students in thousands of pounds of new debt but the system now costs practically the same as the old system because so few students can afford to ever pay their debts back.

"It is clear we have built the student finance system on top of a money pit. I am afraid it can't go on and we now need a debate about how we are going to pay for higher education and the nation's universities in the decade ahead."

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